What Is an Alabama Surplus Lines Broker Bond?
As in most states across the country, surplus lines insurance brokers in Alabama have to obtain a state license that allows legal operations. You need to provide a surplus lines broker bond as a part of the process.
The goal of getting bonded is to provide an additional layer of security for the state and your customers. The bond can provide a compensation if you fail to follow all applicable laws.
The surplus lines broker bond is a contract between your insurance business as the principal and two more parties. The Alabama Department of Insurance is the obligee that requires the bonding. The surety is the third entity that provides the bond.
What are the factors that impact your surety bond cost? When you apply with a surety, it has to scrutinize your personal credit score, business finances, liquidity and assets, and even professional experience. By assessing these criteria, it can estimate the bonding risk involved. The smaller it is, the cheaper your bond price is likely to be.
|Surety bond name||Surety bond amount||Above 700||Between 650-699||Between 600-649||Below 599|
|Alabama surplus lines broker bond||$50,000||$375-$750||$500-$1,250||$1,250-$2,500||$2,500-$5,000|
Questions about Surplus Lines Broker Bonds in Alabama
When is this bond required?
If you want to operate as a surplus lines insurance broker in Alabama, you need to comply with the requirements of the state Department of Insurance. One of the licensing criteria that you have to fulfill is to provide a $50,000 surety bond. By obtaining the bond, you ensure your compliance with the Code of Alabama and any other relevant rules and regulations.
What’s the price of this surplus lines broker bond?
The bond amount that you are required to post to get an Alabama surplus lines broker license is $50,000. You do not have to cover the whole amount to get bonded. Instead, you have to pay only a bond premium. For applicants with solid finances, the usual rates are between 1%-5% of the bond amount.
Can I get bonded with bad credit?
With Lance Surety Bonds, you can get bonded even if your finances are problematic. Applicants struggling with a low credit score, tax liens, bankruptcies, or civil judgements can use from our Bad Credit Surety Bonds program.
Due to the increased bonding risk, the rates you can expect are between 5% to 10%. Our close partnerships with a number of A-rated, T-listed surety companies allow us to offer you a top bond price regardless of your credit situation.
How do I apply for my bond?
For further information about the intricacies of the bonding process, you can refer to our extensive guide on the topic on our How to Get Bonded page.
Lance Surety Bonds’ specialists are here to help you. For any further queries, just call us at (877) 514-5146.
What if I get a claim against the bond?
The goal of your Alabama surplus lines broker bond is to protect the interests of your customers. If a party suffers damages due to illegal activities committed by you, they can demand a compensation via a bond claim.
The maximum penal sum that can be sought is $50,000, which is the bond amount you have obtained. You are fully responsible for covering all costs on proven claims. While your surety may take over the payments at first, it is only to ensure a fast reimbursement to the claimants. This means that it’s best to avoid situations that can lead to claims, as they can cause harm to your finances, as well as to your business standing.